5. Study Questions and Problems #5 Suppose you deposit your paycheck, drawn on another bank. The total money supply in the banking system will_ because: Assets of your bank would increase by a fraction of the amount withdrawn from the other bank. An increase in the assets of your bank by the amount of your paycheck would simply decrease the assets of another bank by the same amount. Assets of the other bank would decrease by more than the amount deposited at your bank.

5. Study Questions and Problems #5 Suppose you deposit your paycheck, drawn on another bank. The total money supply in the banking system will_ because: Assets of your bank would increase by a fraction of the amount withdrawn from the other bank. An increase in the assets of your bank by the amount of your paycheck would simply decrease the assets of another bank by the same amount. Assets of the other bank would decrease by more than the amount deposited at your bank.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Q. 2 Consider a small economy. Suppose that currency in circulation is $200 million, the amount of chequable deposits is $1000 million, and excess reserve holding is $60 million and desired reserve holding ratio is 10%. a) How much money does the economy have? b) How much is its monetary base? c) How much is its money multiplier? 1.5P 1.5P 2P d) If the central bank (CB) conducts an open market purchase of $50 million with an LVTS participant and hence its monetary base (MB) changes accordingly, how much money created in its 1st step, 2nd step and 3rd step of the money creation process for the MB change? And, how much total money created in the end for the MB change?
Banking Question 2 Please use the balance sheet for Bank Alpha to answer the questions. Assume Bank Alpha loans all of its excess reserves, and the assets and liabilities balance on the balance sheet. Show all work. Bank Alpha a. Required Reserves C. Loans e. Assets X $27,000.00 How much is X, the dollar amount of reserves? b. How much is the required reserve ratio? How much is the M? m Checking Deposits Saving Deposits Liabilities $5,000.00 Assume Bank Alpha loans its excess reserves to Bank Beta. Next Bank Beta loans their excess reserves to Bank Gamma. Please create balance sheets for Banks Beta and Gamma. Assume there are no excess reserves in this banking system. d. How much total money stock created in this banking system? What is the total of M1 for Bank Alpha? M2? $25,000.00
6. Required and excess reserves Suppose that Walls Fergo Bank currently has $150,000 in demand deposits and $97,500 in outstanding loans. Assume the Federal Reserve has the reserve requirement set at 10%. Based on this information, complete the following table detailing Walls Fergo Bank's reserves, required reserves, and excess reserves. Reserves (Dollars) Walls Fergo Required Reserves (Dollars) Excess Reserves (Dollars)
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12. A bank has reserves of $40, loans of $110, deposits of $90, and owners’ equity of $60. Which of the following represents the bank’s total assets? $180 $110 $130 $150
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8. The reserve requirement, open market operations, and the money supply Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $500. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement Money Supply (Percent) Simple Money Multiplier (Dollars) 25 10 A lower reserve requirement is associated with a money supply. Suppose the Federal Reserve wants to increase the money supply by $200. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to worth of U.S. government bonds. Now, suppose that, rather than immediately lending out all excess reserves, banks begin holding some excess reserves due to uncertain economic conditions. Specifically,…
2. Here is the balance sheet of the consolidated banking system of the country of Zargadee (all entries are in millions): Consolidated Balance Sheet of the Entire Economy of Zargadee Assets Reserves Cash in Vault Deposits at CBZ Bonds Loans 50 90 Total Reserves Total Assets 140 460 1000 1600 Liabilities Deposits Borrowing from CBZ Total Liabilities 1400 200 1600 Assume that 1) households hold no currency and 2) banks hold no excess reserves. The current reserve requirement is 10%. The Central Bank of Zargadee (CBZ) uses the three traditional tools to perform monetary policy in an economy that is reserve constrained. a. Under our assumptions, what is the money multiplier? For each part (b)-(d) below, i) Conceptually explain the effect of the policy on the money supply. ii) Calculate the change in M1 given our assumptions. iii) Construct the new balance sheet of the consolidated banking system of Zargadee under the new policy. iv) When the money supply changes, list a chain of events to…
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Suppose a commercial banking system had 300,000 of outstanding checkable deposits and actual reserves of 20,000. If the ratio is 0.1%, the banking system can expand the supply of money by maximum of $_________ Can someone tell me how to solve that and explain please
51)Consider the following for National City Bank. If the required reserve ratio is 4 percent, the excess reserves of National City Bank is Assets Liabilities Reserves $10,000 Deposits $100,000 Loans $90,000 Select one: a. $10,000 b. $6,000 c. $3,000 d. $4,000
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